Review of Final Rule on Consumer Operated and Oriented Plan Program

In December HHS issued the final rule for the Consumer Operated and Oriented Plan program (“CO-OP”), created by Section 1322 of the Affordable Care Act (“ACA”), to provide federal loans to foster the creation in every state of private consumer-run nonprofit health insurers (“CO-OP”) to offer qualified health plans in the Affordable Insurance Exchanges (“Exchanges”). 76 Fed. Reg. 77392 (December 13, 2011). The proposed rule was issued in July 2011. 76 Fed. Reg. 43237 (July 20, 2011).

In the final rule HHS rejected one suggestion that the rule explicitly require that FQHCs be included in the provider network of all CO-OPs on the ground that section 1311(c)(1)(C) of the ACA governs the inclusion of safety net providers for issuers that participate in the Exchanges. 76 Fed. Reg. at 77407.

On March 11, 2011 NACHC offered comments on some of the questions posed by HHS concerning this proposed rule. As discussed below, the final rule and the proposed rule – while not otherwise specifically mentioning FQHCs – address some of the matters discussed by NACHC. The following is a summary of the comments NACHC provided, with the responses, when applicable, in the final rule.

NACHC urged HHS to recognize that individual FQHCs, health center-controlled networks, and state or regional primary care associations could act as sponsors of a CO-OP. The proposed rule does not mention (at 43242) FQHCs as examples of entities that could be sponsors (the examples given are entities that received an insurance license after July 16, 2009, self-funded and Taft-Hartley group health plans, church health plans, and “three-share or multi-share” programs not licensed by a state health insurance regulator). The final rule does not address this matter.

NACHC said it thought that it would take a new CO-OP between 12 and 24 months to become operational. The proposed rule required (at 43244) the applicant become an operational CO-OP within 54 months of the first drawdown of a start-up loan or 18 months following the initial drawdown of a solvency loan. The final rule extends these periods to 60 months and 36 months respectively (at 77403).

NACHC said an applicant should be required to submit qualifications and business plans similar to those applying for section 330 grants. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that roughly a minimum of $5-8 million would be required to establish an administrative and claims processing information technology system. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that the amount necessary to capitalize and fund a new CO-OP would depend in part on the solvency requirements established by the state. The proposed rule agrees (at 43244).

NACHC said that there should be preemption of state requirements that hinder the creation of CO-OPs. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that a CO-OP should be allowed to participate in Medicaid or CHIP. The proposed rule provides (at 43243) for such participation; the final rule does not mention this matter.

NACHC said that NACHC and primary care associations would be willing to coordinate training and assistance for CO-OPs and urged that HHS provide funds for such assistance. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that HHS should provide a way for a new CO-OP to gain access to hospitals and specialists at the lowest price charged by these entities to other insurers. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that CO-OPs are more likely to be successful in rural areas. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that the care provided by FQHCs is “integrated care” within the meaning of section 1332. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that the term “significant private support” in section 1332 should include support from local business and labor. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that FQHCs meet all of the priority criteria of section 1322. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that HHS could offer planning grants to a primary care association, a CO-OP in another state, or NACHC if there is no CO-OP in a particular state. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that HHS could follow the CMS criteria for Medicare Advantage Organizations in order to distinguish marketing activities from educational activities; private funds or program income from premiums could be used for marketing. The proposed rule does not mention this matter, and the final rule rejects the suggestion that marketing be defined because it was not mentioned in the proposed rule (at 77396). However, a September 16, 2011 amendment to Funding Opportunity Announcement discusses what “marketing” means: “ ‘Marketing’ means activities that promote the purchase of a specific health care plan or explain a product’s benefit structure, whether targeted at new or current members. “Marketing” does not include activities related to community outreach, membership development, and membership education. Loans provided under the CO-OP program may be used to provide information to members regarding their coverage, rights, and responsibilities.”

NACHC said that it is essential that a new CO-OP be operational in 2014. The proposed rule (at 43244) agrees and says that the first loans will be made in late 2011 or early 2012.

NACHC said that a CO-OP should be considered a “related entity” to a health insurer (a) if they share any ownership or (b) control or the insurer provides more than 50% of the CO-OP’s revenue. Both the proposed rule (at 43241) and the final rule (at 42 CFR 156.505) accept the first part of NACHC’s suggestion.

NACHC said that “predecessor” should mean an entity that no longer exists but that had a common ownership or controlling interest in an entity that now exists. Both the proposed rule (at 43241) and the final rule (at 42 CFR 156.505) define “predecessor” as “any entity that participates in a merger, consolidation, purchase or acquisition of property or stock, corporate separation, or other similar business transaction that results in the formation of the new entity.”

NACHC said that a CO-OP meets the governance requirements for its board by having the applicant have a history of consumer governance along with expertise in insurance, health care, finance, law, accounting, and retail. Both the proposed rule (at 43242) and the final rule (at 42 CFR 156.515(b)) require that each of the CO-OP’s directors be elected by a majority of the persons it insures in a contested election, with the first election being held one year after the CO-OP enrolls members.

NACHC said that HHS should encourage that any profits of the CO-OP be used to reduce premiums in the year profits were earned. Neither the proposed rule nor the final rule mentions this matter.

NACHC said that program to improve the quality of care should come out of the CO-OP’s regular budget and not solely from any profits. Neither the proposed rule nor the final rule mentions this matter.